nep-mfd New Economics Papers
on Microfinance
Issue of 2010‒09‒11
four papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Diversification of Microfinance Institutions: Determinants for Entering the Remittances Market By Ritha Sukadi Mata
  2. Microfinance Institutions Performance. What Matters about the Interaction of Location and Legal Status? By Hubert Tchakoute Tchuigoua
  3. Economic Governance of MFIs: Inside the Black Box By Arun, Thankom; Annim, Samuel Kobina
  4. Adverse Shocks and Social Protection in Africa: What Role for Formal and Informal Financial Institutions? By Abena D. Oduro

  1. By: Ritha Sukadi Mata
    Abstract: As financial intermediaries, microfinance institutions (MFIs) contribute to integrate remittances into the formal financial system. Using a database including 225 MFIs from Latin America and the Caribbean, this paper investigates the institutional factors that influence the MFI decision-making process of entering the remittances market. Operational, managerial, and financial performances are considered as potential explanatory factors. Results exhibit that financial performance has the highest impact on the MFIs’ decision to diversify by offering a remittances service.
    Keywords: microfinance; remittances; money transfer activity; diversification
    JEL: G21 L25 O15 O16
    Date: 2010–09
  2. By: Hubert Tchakoute Tchuigoua
    Abstract: The question this article seeks to answer is whether the relationship between legal status and performance is influenced by the geographical area to which the MFI belongs, as postulated in some work. To this end, we study a sample of 202 MFIs in the period 2001 to 2006. The results show that in Latin America and Eastern Europe, there is no significant difference in profitability between private companies and NGOs. In addition, the commercial approach to microfinance does not seem incompatible with the social mission of MFIs, irrespective of geographical location.
    Keywords: microfinance; efficiency; interaction effect; legal form; governance; region
    JEL: G21 G30 L31
    Date: 2010–08
  3. By: Arun, Thankom (University of Central Lancashire); Annim, Samuel Kobina (University of Manchester)
    Abstract: This paper investigates a relationship between economic governance and the dual objectives of Microfinance Institutions (MFIs): poverty reduction and financial viability. Using an unbalanced panel of 531 MFIs the important role of other institutions such as country-level business registry departments in facilitating targeting of poor clients is illuminated. Comparing the estimates of Hausman-Taylor and Fixed Effects Vector Decomposition allows us to scrutinize and at least partially correct the effects of both time invariant and slow changing endogenous variables. We find that credit information availability and lesser time in securing property enhances the chances of MFIs in achieving their poverty reduction objective. Product diversification leading to economies of scope also enables MFIs to reach poor clients. On the basis of the above, it is imperative for government and development partners to channel their efforts towards provision of an enabling atmosphere that will enhance the achievement of microfinance social objectives.
    Keywords: microfinance, dual objectives, economic governance, property rights, credit information
    JEL: G21 G39 L20
    Date: 2010–08
  4. By: Abena D. Oduro
    Abstract: This paper presents evidence on the wide range of adverse shocks reported by African households. The current financial and economic crisis adds another layer of risk to al-ready vulnerable households and firms. In responding to an adverse shock, households are involved in a balancing act that is aimed at maintaining consumption and/or assets above critical levels. Households mainly use coping mechanisms that depend on family and other networks and self-insurance. There is limited recourse to public social protection and formal credit and insurance markets. The paper examines some informal financial arrangements. Some of these are not designed to smooth consumption when there is an adverse shock. These informal mechanisms have the potential to be the platform to expand access and utilisation of formal finance particularly in rural communities. There is a clear role for publicly provided interventions. This is because informal risk sharing mechanisms do not cover all shocks. The premium paid may not be adequate to cover the entire financial implications of the shock. Finally, the design of the risk-sharing institutions can result in the very poor being excluded.
    Date: 2010–04–15

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